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Trade liberalization, roads and firm productivity

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  • Fiorini, Matteo
  • Sanfilippo, Marco
  • Sundaram, Asha

Abstract

We examine the role of road infrastructure in determining the impact of a reduction in input tariffs on firm productivity. We combine new geo-spatial data on road improvements in Ethiopia with establishment level data on manufacturing firms that allow us to estimate physical productivity. Results show that an input tariff reduction is associated with a larger increase in firm productivity in areas where better roads improve access to other intranational markets. Roads magnify pass-through of tariff reductions to imported input prices and also incentivize firms to exploit this cost advantage to enhance productivity. Road infrastructure hence complements trade liberalization.

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  • Fiorini, Matteo & Sanfilippo, Marco & Sundaram, Asha, 2021. "Trade liberalization, roads and firm productivity," Journal of Development Economics, Elsevier, vol. 153(C).
    • Handle: RePEc:eee:deveco:v:153:y:2021:i:c:s0304387821000869
    DOI: 10.1016/j.jdeveco.2021.102712
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    More about this item

    Keywords

    Input tariffs; Transport infrastructure; Roads; Firms; Productivity; Ethiopia;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure

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